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Credit: BASF
Credit: BASF

The chemical industry held its act together in 2007. With prices up and trade in chemicals especially strong, most world regions saw production grow. But economic conditions such as rising raw material costs and the falling dollar began to have a noticeable effect.

Companies in the U.S. and Europe that had enjoyed a slight break from high costs in 2006 found that profits were squeezed again in 2007. Demand, however, remained strong. Chemical shipments increased 9% in the U.S. and 6.5% in Europe.

Producer prices were up slightly across the board, especially for petrochemicals, as companies sought to pass cost increases along to customers. But the biggest price increases were for agricultural chemicals, which experienced both increased raw materials costs and a large boost in demand. In the U.S., prices for agricultural chemicals rose by 14.5%.

The falling dollar had a large impact on trade balances in the U.S. and Europe. A boom in U.S. plastics exports powered a chemical trade surplus for the first time since 2001. Meanwhile, the strong euro made exports from Europe expensive compared with chemicals priced in dollars, and many countries there saw exports go down.

In Asia, China continued to be the main story. Chinese imports of chemicals went up 22% to more than $68 billion, while exports surged 35% to $51 billion, significantly shrinking that country's chemical trade deficit.

One bright spot was the increase in capital spending in the U.S. and Europe—even as companies faced a cloudy outlook for the global economy. R&D spending was mixed, however, and employment fell in the U.S., Europe, and Canada.

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